Shares of IT major Wipro gained as much as a percent to Rs 312, hovering close to its 52-week high on December 17 after the company announced a deal to buy 100 percent shareholding in Applied Value Technologies and its affiliates Applied Value Technologies Pte Ltd and Applied Value Technologies BV.
This purchase is expected to bolster Wipro’s existing application services capabilities and create new growth opportunities. The deal involves a cash purchase consideration, with a deferred earnout contingent on the achievement of certain performance metrics. The transaction is expected to be completed by December 31, 2024.
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Following the development, Morgan Stanley maintained an 'Underweight' rating on Wipro with a target price of Rs 250 per share. Following the Capco (2021) and Rizing (2022) acquisitions, the brokerage sees Wipro's latest Applied Value Tech acquisition as relatively small. While the acquisition is expected to boost capabilities and add marquee clients to Wipro's portfolio, its small scale is likely to have a limited financial impact in FY25 and FY26.
US-baded Applied Value Technologies specialises in enterprise application development and support services. The company’s consolidated revenue has seen significant growth, from $0.8 million in 2021 to $19.4 million in 2023.
In other news, CLSA highlighted key trends for major IT stocks like Wipro, TCS, and Infosys. For Wipro, CLSA noted the potential for another leg of re-rating if the company announces any changes in capital allocation strategy.The firms showed confidence in improving client sentiments heading into the new year.
Post the recent US election outcome, TCS expects technology budgets to expand in CY25. The furlough impact in BFSI is anticipated to be similar to last year, with recovery expected to become broader across sub-sectors, particularly in the US BFSI space. Infosys, however, is entering a period of weak seasonality in the second half of the year, with Q4 performance expected to be even weaker than Q3.
At about 9:20 am, shares of Wipro were trading at Rs 311, higher by 0.5 percent from the last close on the NSE. The Wipro stock has gained 31 percent since the start of the year.
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